If you plan to run and operate your business, you must understand many aspects of business law. Business law is a specialty that concerns business operation, formation, and transaction, including issues surrounding liability and taxation.
The subject also often deals with managing a business and relationships between owners, vendors, and customers. This article explains the concept of substantial performance in business law and how it may or may not affect your contract. If you have questions, our Ohio business law attorney can help today.
What Does Substantial Performance Mean?
Substantial performance is a legal doctrine where a party in a contract can still recover damages if they ‘substantially performed’ their duties according to the contract. This may be the case even if they did not comply with all contract terms. In most cases, the substantial performance doctrine does not apply to the sale of goods. Instead, it usually relates to property, building, and construction contracts. It also may apply in some cases to employment contracts.
It should be noted that the breach in a substantial performance case must be immaterial. But this does not necessarily mean small or minor. In some cases, even a tiny deviation in parts specifications could affect the assembly or function of a product. A variation in performance is immaterial if it does not affect the contract purpose.
A Non-Material Breach Is Not Always A Breach Of Contract
Substantial performance was created to resolve common issues in contract law. What happens when a party does not abide by every contract term but only in an insubstantial way? The United States legal system has decided that it may be unfair to have a claim for breach of contract against someone that almost but did not entirely fulfill their contractual obligations.
One Ohio court noted that the rule of substantial performance finds that ‘merely nominal, trifling, or technical departures’ could be insufficient to be a breach of contract. That does not mean a minor deviation from the contract terms should be ignored. According to substantial performance, the other party can still subtract reasonable damages from payments to account for the minor breach. In some situations, disputes may arise over what should be deducted from the final payment to compensate for the non-material breach.
Ohio Businesses Can Insist On Specific And Complete Performance
In any contract, the language is critical. When businesses write a vital contract, an experienced Ohio business law attorney must draft and review the agreement. Ohio courts typically affirm that they must uphold the terms of the contract.
If both sides of the contract feel it is correct, they can have a specific and complete performance clause in the contract. This clause eliminates the possibility of substantial performance, and Ohio courts will not excuse you from a breach of contract on substantial performance grounds.
Speak To Our Ohio Business Law Attorney Now
If you are facing a potential breach of contract case, having an experienced attorney at your side is essential. Also, if you are in the process of drafting a business contract, you should have a skilled attorney review it. Our Ohio business law attorney at The Law Office of John C. Grundy can review your case, so please call (330) 637-9030. Mr. Grundy is a highly experienced, skilled advocate for all Ohio business owners and entrepreneurs.